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UNIVERSITY OF KWAZULU-NATAL
SCHOOL OF LAW PIETERMARITZBURG
INTELLECTUAL PROPERTY LAW 2022

HANDOUT 2: INTELLECTUAL PROPERTY LAW IN THE MARKETPLACE

SOURCE MATERIALS
 Ramsden A Guide to Intellectual Property Law Chapter 7 (generally)

CASE LAW
 Nqobion Arts Business Enterprise CC and Business Place Joburg & BeEntrepreneuring
(80/IR/Aug05) [2006] ZACT 24 (22 March 2006) – Competition Tribunal

LECTURE OUTLINE

1. COMPETITION LAW

First world countries first embraced competition law as a means of regulating their economies.
South Africa’s first piece of competition legislation was the Regulation of Monopolistic Conditions
Act, which was followed by the Maintenance and Promotion of Competition Act (1955). Both of
these pieces of legislation were designed to prevent the occurrence of monopolies in trade, and to
encourage businesses and traders to actively (but fairly) compete against one another for the benefit
of themselves, the industry and the consumer.

The current statute is the Competition Act 89 of 1998. Its aim, inter alia, is to promote the efficiency,
adaptability and development of the economy. Its purpose is also to promote a greater spread of
ownership, especially in respect of the historically disadvantaged. Many have argued that the
protection of intellectual property operates against the purpose of competition law, as it provides
the holder of one or more intellectual property rights with exclusivity in respect of the invention,
artistic work or brand. An argument to the contrary is that the protection of one’s intellect
encourages that person to research, develop and create new things for the benefit of the public, or
to improve upon what is already in existence in a quest to bring better technology or new products
to the consumer.

The tension between intellectual property rights and competition law is based on the possible
exercise of intellectual property rights in a manner which is designed to distort competition unfairly,
to the detriment of competitors and consumers. In some cases a jurisdictional tension is created by
the Competition Act and relevant intellectual property statute. (To be discussed in lectures)

The Act aims to promote and maintain fair competition. It allows Competition Authorities to conduct
market enquiries and investigate complex monopolies. It provides for personal criminal liability for
directors and/or persons having management authority who have caused a firm to engage in a
restrictive practice. It creates an investigative body in the form of the Competition Commission.

IPL/Soni/2020
Credit: D Maduramuthu, Adams & Adams
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Members of the public may submit complaints to the Competition Commission, who will then take
on an inquisitorial role and ultimately decide whether the complaint should be referred to the
Competition Tribunal. The Commission may also initiate a complaint on its own. The Competition
Tribunal is the court of first instance for competition law matters and its decisions may be taken on
appeal to the Competition Appeal Court. Appeal to the Supreme Court of Appeal is possible in
certain circumstances.

Businesses who utilise advertising are also bound by the Code of Advertising Practice, which sets the
standards of fair advertising. (Many types of unlawful competition are perpetrated by means of false
or misleading advertising). The advertising industry is self-regulating, and establishes an Advertising
Standards Authority which has the capacity to hear disputes regarding unfair advertising and issue
binding orders.

Where a trader alleges that their rights have been infringed, they have two options. They may seek
the common law remedy in terms of unlawful competition, alternatively they may seek a remedy in
terms of infringement as defined by a statutory law (e.g. Trade Marks Act 194 of 1993).

2. WHY REGULATE THE MARKET?

Competition law is based on two key assumptions. The first is that competition is good as it leads to
economically and socially desirable outcomes. Competition encourages productive efficiency, where
businesses are encouraged to produce goods that the consumer actually wants (a supply and
demand system indicates what products are in demand and the market responds accordingly). It
also encourages allocative efficiency whereby consumers are presented with a range of products of
a certain type which they may purchase. The varying quality and costs ensures that the market is
satisfied.

The second assumption is that businesses must be monitored. The dividing lines between fair, unfair
and unlawful competition are very fine. Section 22 of the Constitution provides for the freedom of
trade, however not only businesses may be unaware that they are not competing within legal
bounds, but they may sometimes deliberately do so.

4. RESTRICTIVE PRACTICES AND INTELLECTUAL PROPERTY RIGHTS

The Act is structured in a way that it may be applied, inter alia, to the relationship between
competitors (horizontal relationships), the relationship between a firm and its suppliers or customers
(vertical relationships), the abuse of a dominant position as well as to mergers and acquisitions. The
fixing of a selling or purchase price, directly or indirectly, or the fixing of any trading conditions as
between competitors is per se prohibited. The setting of a minimum resale price is prohibited, and
while such may be recommended it must be stressed that there is no pressure on sellers, distributors
etc. to adhere to a recommended resale price. A common form of vertical relationship that arises in
the context of intellectual property law is that between a franchisor and franchisee.

Similarly, the division of markets by allocating customers, suppliers, territories or specific types of
goods or services is also strictly prohibited. A general provision also prevents competitors from
entering into agreements which substantially lessen or prevent competition in a particular market.
Problematic in relation to joint use, research and development initiatives between competitors. Anti-
competitive behaviour from a commercial standpoint may also arise in the context of patent
settlement agreements.

IPL/Soni/2022
Credit: D Maduramuthu, Adams & Adams
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